earth science

Supply-side environmental policy

Supply-side environmental policy is a earth science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Supply-side environmental policy rather than just read about it. In short: Supply-side environmental policy refers to regulations that limit or discourage the extraction of natural resources. Such a policy can replace or complement traditional demand-side environmental policy which only seeks to influence the emission level.

Key takeaways

Supply-side environmental policy belongs to earth science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Supply-side environmental policy to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Supply-side environmental policy from memory before moving on to harder problems.

Reference excerpt

Supply-side environmental policy refers to regulations that limit or discourage the extraction of natural resources. Such a policy can replace or complement traditional demand-side environmental policy which only seeks to influence the emission level. Demand-side policies alone will typically lead to carbon leakage.

Economic research Bohm (1993) first presented an analysis where he showed that removing fossil fuel reserves from the market can be beneficial as a climate policy. Hoel (1994) subsequently showed that an optimal climate policy for a country, or a coalition of countries, is generally a combination of two policy instruments: Demand-side policies and supply-side policies. The optimal combination of the two instruments generally depends on whether carbon leakage is largest at the demand side or the supply side. Leakage is large if the other consumers or producers react more when the fossil fuel price changes: I.e., if the price elasticity is large. Harstad (2012) showed that a coalition of countries can benefit from purchasing and retiring fossil fuel reserves in other countries. This will both reduce the total emission and it will reduce carbon leakage on the supply side. Therefore, the coalition will subsequently benefit from reducing its own supply, rather than its demand of fossil fuel, because carbon leakage remains large on the demand side. Under fossil-fuel reserves market clearing, the outcome is first best. Because the mechanism is stronger when many countries reduce their supply, the economic mechanism points to the benefit of a supply-side climate treaty, perhaps to complement the Paris Agreement. Lazarus and van Asselt (2018) have discussed the challenges that must be overcome for supply-side policies to be successful at the global level.

Politics Traditional climate policies, such as the Kyoto Protocol and the Paris Agreement, have focused on the demand side. However, one motivation for supply-side policies is that this traditional approach has not successfully addressed climate change at the global level. Erickson, Lazarus and Piggot (2018) describe the rationale for why seven countries have imposed limits on their production of fossil fuels, and they documented that also California could reduce global emissions in this way. The Fossil Fuel Non-Proliferation Treaty Initiative builds on the idea that supply-side environmental policy can be beneficial. A similar movement, with the same rationale, is the Leave it in the ground initiative.

References

Worked examples

Example 1 — a first encounter with Supply-side environmental policy

Start with the simplest possible case. Write down what Supply-side environmental policy claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In earth science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Supply-side environmental policy before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Supply-side environmental policy ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Supply-side environmental policy

In research: Supply-side environmental policy appears in earth science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Supply-side environmental policy in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Supply-side environmental policy is common in secondary-school and first-year university syllabi. It links to neighbouring topics Climate change mitigation, Climate change policy, Energy policy, so understanding it makes those chapters shorter.
In everyday life: Look for Supply-side environmental policy outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Supply-side environmental policy in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Supply-side environmental policy means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Supply-side environmental policy out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Supply-side environmental policy in simple terms?

Why does Supply-side environmental policy matter?

Because it connects several earth science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Supply-side environmental policy?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Supply-side environmental policy.